Tag Archives: ETFs

Why are Markets Falling?

Was just watching CNBC TV18 as I am getting ready to come to work and one interesting discussion that came up on TV was about the reasons as to why the markets world over are falling and 3 main reasons being given are:

  • China reducing its stimulus measures which were implemented as part of the recession curtailing measures and debates there on ending the entire stimulus package in China to curtail the excess lending and related concerns.
  • Secondly, the macro economic indicators not showing very great signs in the US. (Jobs, industrial production and ?)
  • Thirdly, the European crisis of Sovereign Ratings declines in economies like Greece and more concerns from other countries in the Euro zone like Spain, Portugal..

This is leading to US investors primarily moving funds out of the ETFs investing in developing countries like India and China as well, spreading around the global falls that we are currently seeing.

One more interesting observation, was about the second largest province in China in terms of exports, increasing the minimum wage and therefore, it seems “increasing concerns of Global Inflation”!! (I can’t believe this though!)

Anyways, will bring in more updates later..

Exchange Traded Securities

Hello, have you heard of exchange traded funds(ETFs) the now popular investment instruments for financial investors? Well, if not, here are some notes on these instuments. ETFs are quite wonderful instruments, to understand, are something like mutual funds being composed of a basket or portfolio of securities, but the best part is that unlike the mutual funds, these can be bought and sold on exchanges just like stock..so just providing that special edge required especially in these choppy and volatile markets.

To take the discussion a bit further, these ETFs typically constitute their portfolios by being based on an underlying “Index” chosen by the issuer. So, these ETFs try to replicate the movement of the Index by creating a portfolio of stock with the same constituent stocks as the Index and in the same ratio as in the Index. The portfolio thus created, forms the base for the ETF and in effect shares of this investment portfolio are offered as ETF shares.

The popular ETFs and ETF companies are Realty Funds Inc. offering the “Adelante Shares” range of Real estate exchange traded funds, the popular iShares from Barclays, PowerShares from Invesco, NETS ETFs from Northern Trust, Vanguard ETFs, WisdomTree ETFs , the Spiders or SPDRs from State Street, HealthShares, Claymore ETFs and many others.

From the list of the issuers itself we can assess the popularity of these instruments. Each of these issuers further issue tens or some even a hundred and more ETFs. The ETFs from these various issuers are based on a variety of aspects like some issue ETFs based on the various sectors of industry like the WisdomTree International Basic Materials Sector Fund, Intl. Communications Sector Fund, Intl. Energy Sector Fund and some choose to create funds based on performance of Indices in different countries like say, NETS TOPIX Index Fund based on Japanese securities, WisdomTree India Earnings Fund etc. Some other areas on which the ETFs could be based on are Growth or value prospects like from iShares, disease and medicine company based like from HealthShares etc. So, each issuer chooses a specturm of areas and opputrunities to target their ETFs on, so that investors can pick and choose the geography or Index or a sector on which they would like their ETFs to be based on.